This interview is part of our new Blockchain In Lending series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and lending.
In this interview we speak with Alex Mashinsky, CEO of Celsius Network, to understand how his company is using blockchain to transform the lending business, and what the future of the industry holds.
1. What's the story behind Celsius Network? Why and how did you begin?
AM: Throughout my career, I have been fortunate enough to start and build ventures that successfully disrupted several different industries. I was born in the Ukraine, grew up in Israel, and moved to the US about 30 years ago in pursuit of living the American dream through financial independence. My experiences living in communism, then socialism, and now capitalism have given me a unique perspective on our economic systems.
Anyone who knows me knows that capitalism has worked in my favor; however, I attribute my success under capitalism to projects very much rooted in “socialist” ideals – that is to say, I’ve always strived to build businesses that bring power back to the people and do more for the community and for the common good than for the one percent.
In the 90’s, I was outraged at how much phone companies charged people to call one another, so I helped create VOIP with Arbinet to give free service to everyone on the planet. Arbinet grew to become a billion-dollar company listed on NASDAQ, but only after billions of people got to use the service around the world.
After the crash of 2008, I felt obligated to do my part to give back to the people. I started getting involved in cryptocurrency and experimenting with different blockchain-based technologies, and I realized very quickly that the blockchain is the best opportunity we have to create universal income around the planet and replace traditional banks with a democratized system that acts in our best interests. Over the years, banks have paid us less and less for our hard-earned money. Now we’re at the point that, in many countries, you have to pay the bank to take a deposit and access your own money. That sounds just as ridiculous as paying $3 a minute for a phone call.
Celsius Network was created to provide high-interest income to those otherwise unserved or underserved by our current economic structure. Celsius completed an ICO in March 2018 and launched our app in July that same year. We now have over $100m on deposit earning 4-7% interest for people from over 100 countries, and there’s been no looking back. We’re in this for the long-haul.
2. Please describe your use case and how Celsius Network uses blockchain:
AM: Our platform uses the blockchain in a few different ways. First, our app supports 18 different cryptocurrencies as the value you can deposit to earn interest, all of which rely on the blockchain to have their own individual use cases. When we started building the app, we wanted to create an easier way for people to send and receive these cryptocurrencies, so we built our own blockchain-based “Venmo” feature within the app – CelPay. CelPay allows anyone in the world to send and receive cryptocurrency, even if they don’t have a digital wallet or even know how crypto works. By using CelPay, a wallet is created for the user and records each transfer onto the blockchain.
Our newest blockchain-based use case is $CEL, our Ethereum (ER-20) utility token. We recently announced the first 7 utilities for CEL, all of which were designed with our community’s best interests in mind. Some of these utilities include membership, greater rewards for HODLers, higher interest rates on deposits, and lower interest rates on dollar loans.
The most important part of our use case on the blockchain involves transparency. Very few (if any) financial institutions will disclose what they use your money for or whom they lend it to. Celsius decided to write all our deposits, loans, interest payments and distribution to an immutable blockchain so anyone can audit us 24/7 to make sure we are acting in the depositors best interests. I love Roland Reagan’s “Trust but Verify,” and it’s time we applied this same concept to the banks. If you know where your money is being used, you have a much better chance of making sure it is not abused or is used to take excessive risk.
3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?
AM: I’ll share one of my favorite success stories. One of our core services is generating high-interest income. Celsius users who deposit coins with us start earning interest on those assets immediately. Interest is paid out weekly in-kind directly into the Celsius user’s wallet. This happens every Monday like clockwork. We don’t earn more than banks on these deposits; we just commit to give 80% to the depositors instead of what banks do, which gives 80% to their shareholders as dividends.
One way people capitalize on this feature is by withdrawing their earned interest each week to use that as spending money or fast cash. We had one customer who needed to cover the costs of an unexpected ER visit for his cat, so he withdrew his interest from that week, exchanged his crypto for cash, and was able to cover his cat’s medical bills all because of the money he earned just by HODLing with Celsius. Several months later, this same customer needed a cash loan to help his dad buy a house. We were able to give him a dollar loan using his crypto as collateral at a rate that is a fraction of what he would have been paying had he applied for that same dollar loan at a bank or used his credit card. What we’ve found is that there are unlimited use cases for Celsius because our platform truly acts in their best interests which results in us provide people with rewarding services that just don’t exist in the “traditional” financial sector. Once people switch to our platform, they realize pretty quickly how much they had been giving up by keeping their funds in the hands of people who weren’t acting in their best interest.
— $42K in 2019-2020. Its coming, OK?⚡️ (@markfinelli) November 5, 2018
4. What other blockchain lending use cases are you excited about?
AM: I love the DeFi movement which includes Maker and other companies. Our wallet supports DAI and pays 5.5% interest on these tokens. We are still developing all the lending use cases, but it is clear that the fungibility of these assets all over the world and the ability to take low cost financial services we take for granted here in the US and transport them via the blockchain to Africa or India where none are available is a life-changing event for 90% of the world’s population that is yet to join the middle class.
5. Where will Celsius Network be in five years?
AM: Our goal is to bring the next 100 million people into crypto. Now, will that happen in the next five years? It will if we work hard at it and get our community to bring their friends and family into this revolution. As someone who has seen this movie before, I can tell you that VOIP was an easy sell as all our customers called their friends and family and got them to switch to apps instead of expensive landlines. Now 3.5 billion people use VOIP almost every day. MOIP – or Money over IP – is going to work exactly the same way once people wake up and realize that they are of tired working for the money and want the money to work harder for them.